Credit card debt 'not for young'

A TOP executive of Capital One bank has admitted that young people should take out its credit card only if they pay the full balance off each month, despite publishing leaflets encouraging them to pay only the minimum amount.

Fergus Brownlee's foot-in-mouth comments rival those of Matt Barrett, chief executive of Barclays, who famously told the Treasury Select Committee he would not borrow money on a credit card as it's too expensive.

Yesterday, it was the turn of Mr Brownlee, Capital One's executive vice-president Europe, who buckled under pressure from the same committee after it grilled him and his peers at Halifax/Bank of Scotland and Lloyds TSB over credit card charges and marketing.

Mr Brownlee was shown one of his firm's own leaflets by MP Nigel Lamb (Lib Dem, North Norfolk) featuring a scenario of a young person who spends £200 a month and says their minimum monthly repayments could be as low as £6 per month.

Mr Lamb pointed out that it failed to mention the debt would grow substantially through interest charges if you only pay the minimum amount off each month. He said: 'Why don't you say you should be paying off more if you can?'

Mr Brownlee replied: 'A young person, 18 to 21 years old, should not even be getting into the product unless perfectly capable of repaying in full every month.'

He added: 'This would have been a useful place to put this (a health warning), but there are limitations on the amount of information you can put on at the marketing stage.'

But James Crosby, chief executive of Halifax/Bank of Scotland, said his firm put minimum payment warnings on its marketing literature.

Capital One also came under fire for the way it restricts its best deals to a chosen few. It has a flat rate credit card charging 6.9% APR - one of the cheapest on the market. But Mr Brownlee admitted that just over a quarter (28%) of people who applied for this card actually got it. Of those turned down 40% were offered cards with higher interest rates.

The Treasury Select Committee also pulled Capital One up for its use of summary boxes - which should show all the relevant interest rates and charges clearly - which the industry had agreed to include on literature sent out to customers.

MPs said Capital One's boxes were too small in print and were hidden away, unlike other providers who printed them in bold on statements.

Angela Eagle (Lab, Wallasey) said: 'You are complying in the most begrudging way as if you do not want customers to notice. That's the impression you are giving.'

MPs were due to question the banks over the rise of fee-charging cash machines but the issue is deemed to be so important they have scheduled a separate hearing with chief executives.

• GRAHAM and Deborah Bosanquet (pictured with their daughter Jessica, 12) have switched their credit card to Nationwide, which includes summary boxes on all its monthly statements.

The Bosanquets, from Ringwood, Hampshire, have been moving money from other credits cards, including Egg and Halifax, to make the most of provider's interest-free periods. They have now settled with Nationwide where they have transferred just over £2,500.

Mr Bosanquet, a 50-year-old sales manager, says:'The bill always shows what interest rate I would have to pay plus the charges and fees if I pay late - all clearly shown in the summary box. It's the way that all credit cards should be run.' Nationwide introduced summary boxes in 2003 and started sending them out on all credit card statements last month.

Its Classic card has an introductory offer of 0% interest for six months on balance transfers and purchases. After that, the rate is 13.9% APR.